N.M. Admin. Code § 2.60.25.14

Current through Register Vol. 35, No. 23, December 10, 2024

Section 2.60.25.14 - EQUITY INVESTMENT

A. Constitutional and statutory restrictions:

(1) The New Mexico state permanent fund may invest in "common and preferred stocks and convertible issues of any corporation organized and operating within the United States; provided that it has a minimum net worth of twenty-five million dollars ($25,000,000) and securities listed on one or more national stock exchanges; and provided further that the fund shall not own more than five percent of the voting stock of any company. Common stocks should represent a diversified portfolio with an above average current yield and the prospect for dividend increases and capital appreciation" (Section 6-8-9 F. NMSA 1978). Such investments are subject also to the restriction that common stocks purchased must be those of corporations having a 10 year consecutive dividend history at the date of purchase (New Mexico Constitution, Article XII, Section 7).

(2) Dividend income shall be distributed to the permanent fund's beneficiaries but capital gain proceeds shall be retained as part of the fund. (Section 6-8-12 NMSA 1978).

(3) Commissions paid for the purchase and sale of any security shall not exceed brokerage rates prescribed and approved by national stock exchanges or by industry practice. (Section 6-8-9 NMSA 1978).

(4) Similar statutes apply to the severance tax permanent fund and are contained in Section 7-27-5.1 NMSA 1978. The STPF is additionally limited in that common stocks, at the time of purchase, may not exceed 20 percent of the book value of the fund.

B. Council goals and policies:

(1) The council has adopted the following goals for the management of the equity portfolios:

(a) maintenance of a well-diversified portfolio of common stocks with good quality and liquidity characteristics; and

(b) maximization of the portfolio's total return to include an above average dividend yield.

(2) Achievement of these goals by the state investment office will be pursued under the following policies:

(a) Common stocks shall be chosen from a universe having the following characteristics:

(i) U.S. incorporated;

(ii) securities listed on the NYSE;

(iii) minimum market capitalization of $500 million;

(iv) minimum owner's equity of $25 million.

(b) The number of stocks in the portfolio shall range from 40 to 70 with no single stock representing more than 5 percent of the portfolio's total current market value.

(c) The average dividend yield on the portfolio over time should exceed that of the market in general; and

(d) The portfolio shall be diversified by industry in line with the S&P 500's industry weightings based on market capitalization, with an allowable variance of plus or minus 100 percent except for industries representing more than 5 percent of the S&P 500 which will not be weighted less than 50 percent of the S&P 500's weight.

N.M. Admin. Code § 2.60.25.14

Recompiled 10/1/01